Chap 01 17e - Warren
Indicate whether the statement is true or false.
1. The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
ANSWER: False
2. Some of the major fraudulent acts by senior executives started as what they considered to be small ethical
lapses that grew out of control.
a. True
b. False
ANSWER: True
3. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False
4. Generally accepted accounting principles regulate how and what financial information is reported by businesses.
a. True
b. False
ANSWER: True
5. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to management.
a. True
b. False
ANSWER: True
6. The majority of businesses end their fiscal year on December 31.
a. True
b. False
ANSWER: True
7. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False
ANSWER: False
Page 1
,Name: Class: Date:
Chap 01 17e - Warren
8. If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets
also total $300,000.
a. True
b. False
ANSWER: False
9. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True
10. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United
States.
a. True
b. False
ANSWER: True
11. Net income and net profit do not mean the same thing.
a. True
b. False
ANSWER: False
12. No differences exist between the accounting standards issued by the FASB (U.S. GAAP) and the IASB
(IFRS).
a. True
b. False
ANSWER: False
13. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True
14. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the
same period, the period's change in total stockholders' equity was a $200,000 increase.
a. True
b. False
ANSWER: True
Page 2
,Name: Class: Date:
Chap 01 17e - Warren
15. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False
16. Cash dividends paid to stockholders decrease assets and increase equity.
a. True
b. False
ANSWER: False
17. Purchasing supplies on account increases liabilities and decreases equity.
a. True
b. False
ANSWER: False
18. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False
19. A fiscal year that ends when business activities have reached their lowest point is called the natural business
year.
a. True
b. False
ANSWER: True
20. Any 12-month accounting period adopted by a company is known as its fiscal year.
a. True
b. False
ANSWER: True
21. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
ANSWER: False
22. Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
a. True
b. False
ANSWER: False
Page 3
, Name: Class: Date:
Chap 01 17e - Warren
23. Proprietorships are owned by one owner and provide only services to their customers.
a. True
b. False
ANSWER: False
24. The excess of revenue over the expenses incurred in earning the revenue is called capital.
a. True
b. False
ANSWER: False
25. Paying an account payable increases liabilities and decreases assets.
a. True
b. False
ANSWER: False
26. If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the
buyer would record the building at $85,000.
a. True
b. False
ANSWER: False
27. The basic difference between manufacturing and retail companies is the completion level of the products they
purchase for resale to customers.
a. True
b. False
ANSWER: True
28. The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from
income activities, and cash flows from equity activities.
a. True
b. False
ANSWER: False
29. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False
ANSWER: True
Page 4
Indicate whether the statement is true or false.
1. The stockholders' rights to the assets rank ahead of the creditors' rights to the assets.
a. True
b. False
ANSWER: False
2. Some of the major fraudulent acts by senior executives started as what they considered to be small ethical
lapses that grew out of control.
a. True
b. False
ANSWER: True
3. The financial statements of a proprietorship should include the owner's personal assets and liabilities.
a. True
b. False
ANSWER: False
4. Generally accepted accounting principles regulate how and what financial information is reported by businesses.
a. True
b. False
ANSWER: True
5. Financial accounting provides information to all users, while the main focus for managerial accounting is to
provide information to management.
a. True
b. False
ANSWER: True
6. The majority of businesses end their fiscal year on December 31.
a. True
b. False
ANSWER: True
7. The main objective for all businesses is to maximize unrealized profits.
a. True
b. False
ANSWER: False
Page 1
,Name: Class: Date:
Chap 01 17e - Warren
8. If the liabilities owed by a business total $300,000 and stockholders' equity is equal to $300,000, then the assets
also total $300,000.
a. True
b. False
ANSWER: False
9. An example of an external user of accounting information is the federal government.
a. True
b. False
ANSWER: True
10. The monetary unit assumption requires that economic data be recorded in dollars for companies in the United
States.
a. True
b. False
ANSWER: True
11. Net income and net profit do not mean the same thing.
a. True
b. False
ANSWER: False
12. No differences exist between the accounting standards issued by the FASB (U.S. GAAP) and the IASB
(IFRS).
a. True
b. False
ANSWER: False
13. The Financial Accounting Standards Board (FASB) is the authoritative body that has primary responsibility for
developing accounting principles.
a. True
b. False
ANSWER: True
14. If total assets increased by $190,000 during a specific period and liabilities decreased by $10,000 during the
same period, the period's change in total stockholders' equity was a $200,000 increase.
a. True
b. False
ANSWER: True
Page 2
,Name: Class: Date:
Chap 01 17e - Warren
15. Managerial accounting information is used by external and internal users equally.
a. True
b. False
ANSWER: False
16. Cash dividends paid to stockholders decrease assets and increase equity.
a. True
b. False
ANSWER: False
17. Purchasing supplies on account increases liabilities and decreases equity.
a. True
b. False
ANSWER: False
18. Proper ethical conduct implies that you only consider what's in your best interest.
a. True
b. False
ANSWER: False
19. A fiscal year that ends when business activities have reached their lowest point is called the natural business
year.
a. True
b. False
ANSWER: True
20. Any 12-month accounting period adopted by a company is known as its fiscal year.
a. True
b. False
ANSWER: True
21. Investing activities are those activities by which the company obtains funds to start and operate the business.
a. True
b. False
ANSWER: False
22. Receiving a bill or otherwise being notified that an amount is owed is not recorded until the amount is paid.
a. True
b. False
ANSWER: False
Page 3
, Name: Class: Date:
Chap 01 17e - Warren
23. Proprietorships are owned by one owner and provide only services to their customers.
a. True
b. False
ANSWER: False
24. The excess of revenue over the expenses incurred in earning the revenue is called capital.
a. True
b. False
ANSWER: False
25. Paying an account payable increases liabilities and decreases assets.
a. True
b. False
ANSWER: False
26. If a building is appraised for $85,000, offered for sale at $90,000, and the buyer pays $80,000 cash for it, the
buyer would record the building at $85,000.
a. True
b. False
ANSWER: False
27. The basic difference between manufacturing and retail companies is the completion level of the products they
purchase for resale to customers.
a. True
b. False
ANSWER: True
28. The statement of cash flows consists of three sections: cash flows from operating activities, cash flows from
income activities, and cash flows from equity activities.
a. True
b. False
ANSWER: False
29. Operating activities are those activities by which a company generates revenues from customers.
a. True
b. False
ANSWER: True
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